October 2, 2015

HOA managers brace for changes in disclosure laws

The Integrated Disclosure Rule for TILA-RESPA (Truth in Lending Act- Real Estate Settlement Procedures Act of 1974) goes into effect Saturday, Oct. 3. The Consumer Financial Protection Bureau’s “Know Before You Owe” rule is intended to help consumers understand their loan options, shop for the mortgage that’s best for them and avoid costly surprises at the closing table.

Schwab

This mortgage disclosure rule replaces four existing disclosure forms with two new ones: the Loan Estimate and the Closing Disclosure. The new forms are easier to understand and easier to use. The rule also requires that you get three business days to review your Closing Disclosure and ask questions before borrowers close on a mortgage.

The Loan Estimate details the transaction – including the estimated loan and closing costs. Consumers can use this form to do apples-to-apples comparison shopping between loans. The Closing Disclosure, which details the final transaction, is provided to consumers at least three business days before closing. This time period allows consumers to confirm whether they are getting what they expected, ask questions and negotiate changes. The Loan Estimate and Closing Disclosure mirror each other, making it easy to compare estimates with final loan terms.

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These are timely and useful modifications to simplify the closing process for prospective homebuyers.

This new mandate also requires lenders to provide additional homeowner’s association information for mortgage loan closings with strict information compliance and delivery guidelines. In order to ensure compliance, HOA managers will see the following changes:

Status letters will be requested earlier in the transaction process. Status letters will be required earlier from HOA managers, even up to two weeks before closing to allow lenders to meet their federally mandated deadlines.

Additional HOA Information will be requested with a short turnaround time. Specific HOA information pertinent to the borrower is required to be included in the Loan Estimate, which is a new disclosure per federal standards. Federal law requires lenders to provide this disclosure of information (such as all fees charged by the manager and the association) within three business days following the borrower’s request.

Errors in reporting and delivery after a required deadline could mean the transaction deadlines start over.

This change, coupled with Colorado’s newly implemented Community Association Management rules (which requires the licensure of HOA managers in Colorado), puts significantly more pressure on managers who now have additional reporting requirements and, in some cases, can be fined for noncompliance.

Colorado’s Community Association Manager licensing rule, in effect since July 1, requires property managers to disclose their closing fees within three business days. Penalties can be assessed for not meeting this deadline.

All of these changes multiply a manager’s volume of work and create an increased urgency. A manager might be a community’s bookkeeper, attorney, professional HOA management company or, in many cases, your neighbor who has volunteered to run your self-managed HOA to control assessment costs. Each of these manager profiles has varying levels of expertise and resources available to effectively manage an organized community.

According to the Community Association Institute, more than 26.7 million homes are part of the more than 333,000 homeowner’s associations in our nation in 2014. In Colorado, 1.5 million homes fall under the governance of almost 9,100 homeowner’s associations. These numbers will only grow with the development of new housing.

A lot of confusing and contradictory information has been circulated abound the Integrated Disclosure rule. The industry will launch into these revisions on Oct. 3 amid a lot of questions and concern. Clearly, the CFPB will be troubleshooting for months to resolve the lingering questions presented by real estate professionals after the mandate is in effect. And the efforts of your mortgage lender, title company and prospective homeowner’s association manager will work together to deliver much more clarity and speed on your behalf.

Mike Schwab is chief executive of Fort Collins-based Association Online, a wholly owned subsidiary of ProHOAm Inc. an 8(a) certified, Native-American-owned small business serving the information needs of lenders, investors, mortgage servicers, property managers and HOAs.

The Integrated Disclosure Rule for TILA-RESPA (Truth in Lending Act- Real Estate Settlement Procedures Act of 1974) goes into effect Saturday, Oct. 3. The Consumer Financial Protection Bureau’s “Know Before You Owe” rule is intended to help consumers understand their loan options, shop for the mortgage that’s best for them and avoid costly surprises at the closing table.

Schwab

This mortgage disclosure rule replaces four existing disclosure forms with two new ones: the Loan Estimate and the Closing Disclosure. The new forms are easier to understand and easier to use. The…

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